UK general election 2017

Now the UK has ended up with a hung parliament, how will markets respond? Take your position around the clock with IG Bank.

Why trade the election with IG Bank?

  • Go short or long

    Think a bear market’s on the horizon? Take a short position

  • Trade on the market reaction

    Trade CFDs on over 15,000 markets, including GBP/USD and the FTSE 100.

  • Weekend trading

    Target key markets ahead of the vote with Weekend trading.

How to trade the election with IG Bank

You can take a position on a range of possible election outcomes.

With over 15,000 markets available, you can trade CFDs on:

  • FX pairs, including GBP/USD and GBP/EUR
  • Indices, including the FTSE 100 and FTSE 250
  • Commodities, including gold

Markets to watch

When Theresa May called a snap election, her lead in the polls was so substantial that an increased mandate seemed to be a given — a sentiment endorsed by a boost in sterling.

But Jeremy Corbyn’s resurgence in the latter weeks of his campaign upset the best laid plans of May and the markets. Now there are more questions than ever over what’s next for the UK and the impending Brexit negotiations.

Despite the surprise referendum result of last year, the pound had achieved something resembling stability prior to the election. In light of this result, however, expect the pound to revert to a state of continued and heightened volatility as traders take stock of what lies ahead for the British government. As ever, EUR/GBP and GBP/USD will be key pairs to watch, though be mindful of coming US legislation which may keep dollar traders beating to the tune of a different drum.

Markets Bid Offer Updated Change
FTSE 100
FTSE Mid 250
Germany 30

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In theory, a weaker pound ought to prove positive for the FTSE 100, given the benefits its constituents have received from cheaper exports. But between the prospect of a divided government and the ambiguity of a new Brexit strategy, the momentum the big cap index has been building looks soon to be a distant memory. Likewise, the FTSE 250 - which has recently been given a boost by the prospect of Conservative pro-business policy - faces renewed uncertainty in its future.

In such times, gold is a go-to, and the result may well encourage the rally it’s been enjoying for the past few months. Some analysts have anticipated that more political upsets in 2017 would drive the precious metal higher, and Corbyn’s result might just lend weight to their ambitious predictions.


What is a hung parliament?

In a hung parliament, none of the political parties manages to secure an outright majority in the House of Commons. Two parties must then form a coalition government to achieve the majority required. Alternatively, the party with the highest number of votes takes power, but lacks the mandate it needs to pass legislation on its own.

How will a hung parliament affect the pound?

Uncertainty breeds uncertainty, and the hung parliament with which the UK now finds itself is bound to create volatility in the pound. This is likely to be exacerbated in the next few weeks and months, as the markets try to get a handle on what’s next for the UK government and the upcoming Brexit negotiations.

Who won the most seats in the election?

With Kensington’s votes still yet to be verified, currently the Conservatives have secured the most seats in the general election, with a total of 318. They are followed by Labour (261), the SNP (35) and the Lib Dems (12).

How many seats did the Conservatives lose?

With Kensington’s votes still yet to be verified, the Conservatives have so far seen their seats in Parliament fall by 12, down from an original 330. This means they’ve lost their post-2015 election working majority of 17 seats.

Will the Conservatives form a coalition?

The Conservatives next steps will become clearer over the next few days. A number of parties pre-emptively took a coalition with the Tories off the table during campaigning, including the Lib Dems. The most likely option would be Northern Ireland’s DUP, whose ten seats would take them over the 326 required. But with a very different Brexit agenda to Theresa May, the two parties may struggle to reach an agreement.

Alternatively, May will simply try to lead a minority government. To do so, she’ll need to get the backing of the other parties in a vote of confidence. In any case, this won’t happen until after Brexit negotiations were due to begin on 19 June.

As long as the complexion of our government remains in question, the pound will be on shaky ground. And this ground is unlikely to stabilise once such a decision is reached: by pushing back Brexit negotiations, the prospect of no deal is looking increasingly likely. 

Will May step down as prime minister?

May has confirmed she intends to stay in her role as prime minister, but it remains to be seen if pressure from both within and outside her party will force her to stand aside over the next few weeks.

While stepping down now would create added uncertainty, markets would no doubt rather see her go sooner rather than later, as opposed to an extended period of political gridlock and another knock to the pound further down the line.

What’s next for Brexit negotiations?

Brexit negotiations were scheduled to begin on 19 June, but the hung parliament will likely put paid to that. It will become clearer with time how a divided government will disrupt the transition, but since the clock is already ticking, they will likely be keen to get things underway sooner rather than later. 

Why do elections create volatility?

As with any event whose outcome is an unknown, elections encourage speculation among traders. The less certain a result is, the more volatility you’re likely to see.

This election in particular is seen as a key influence for the financial markets, because it will either cement or upend the direction of the impending Brexit negotiations. So while the Conservatives are expected to gain a mandate, recent political upsets may give the markets cause for added volatility ahead of the result.

When was the next election supposed to be held?

The next election in the fixed-term cycle was due to take place in March 2020.

Despite promises that an early vote wasn’t on the cards, clearly the prospect of another general election became all too tempting for May, whose party had been leading significantly in the polls for some time when she called the snap election in April. 

Why did May call an election?

Back in April when Theresa may announced a snap election, the Tories’ lead in the polls was substantial and Labour was floundering. It would give her an opportunity to consolidate her own position in the eyes of the European leaders with whom she would be negotiating, and to secure an increased mandate to make it easier to pass a Brexit deal.

Unfortunately, her plans backfired, with a Labour resurgence bringing about a hung parliament and further uncertainty.  

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